basic b volunteer training tax year 2014. federal nonrefundable and refundable credits new: premium...
TRANSCRIPT
• Federal nonrefundable and refundable credits
• NEW: Premium Tax Credit and related credit “reconciliation”
• Exemptions to the ACA insurance coverage requirement
• Other federal taxes and related tax issues
• Financial services at the tax site
BASIC B TRAINING OVERVIEW
ACA THE BASICS• The ACA created the Health Insurance Marketplace –
Minnesota has it’s own marketplace, MNsure
• MNsure marketplace is where Minnesotans find information about health insurance options, purchase health insurance and enroll in public health plans
• Taxpayers must report whether he/she (and family) had insurance coverage for the year on their tax return
THE TAX RETURN
• A new tax credit, the Premium Tax Credit (PTC), is available to help eligible taxpayers pay for coverage
• Taxpayers could elect to claim the PTC throughout the year to help pay monthly insurance premiums – Advanced Premium Tax Credit (APTC)
• The ACA also includes the individual shared responsibility provision, which requires individuals to have health insurance coverage for their family
• Form 8962, Premium Tax Credit (PTC), Form 8965, Health Coverage Exemptions, and Form 1095-A, Health Insurance Marketplace Statement
LINE 46: EXCESS ADVANCE PREMIUM TAX CREDIT
• Must have purchased health insurance through MNsure marketplace
• Advanced payments of the Premium Tax Credit to help taxpayer pay their 2014 monthly insurance premiums
• Advanced payments were based on the estimated income the taxpayer entered on their MNsure application
• Complete Form 8962 to “reconcile” their payment – comparing what they estimated their income would be and what their actual income was for 2014 – did they receive too much advanced payment
• Must have Form 1095-A to complete the return
LINE 61: HEALTH CARE, INDIVIDUAL RESPONSIBILITY
Taxpayer and each family member must have –
A. Health coverage,
B. Qualify for a health coverage exemption, or
C. Make a shared responsibility payment (SRP) on their tax return
WHAT YOU NEED TO DETERMINE
• Did everyone listed on the return have insurance coverage?
– Yes, is the insurance coverage considered MEC and what months was the taxpayer (family) insurance in 2014
– No, is the taxpayer (family member) required to file a return or eligible for an exemption from insurance coverage
YES, THE TAXPAYER (FAMILY) HAS HEALTH INSURANCE
• Is the health insurance considered minimum essential coverage (MEC)?
• If the taxpayer (family) had MEC insurance coverage all year, check the “full coverage” box on line 61, click your heels and shout hooray!
• If the coverage was not all year, complete Worksheet 8 in TaxWise
NO, THE TAXPAYER (FAMILY) DID NOT HAVE HEALTH INSURANCE
• Check the federal filing requirement threshold to determine whether the taxpayer is required to file a return
• Determine whether the taxpayer (family) may qualify for an exemption from the penalty
MINIMUM ESSENTIAL COVERAGE
• Insurance through employer
• Insurance purchased through private company
• Insurance purchased through MNsure marketplace – must have Form 1095-A to complete the return
• Student health plans
• Government-sponsored
EXEMPTIONS TO THE PENALTY
• Taxpayer (family) may be eligible for more than one exemption
• Find the exemption that is least complicated
• Undocumented taxpayers are exempt from the penalty (exemption code C)
• Some exemptions require approval from the federal marketplace
• Taxpayer can elect to take the penalty without claiming an exemption
LINE 69: NET PREMIUM TAX CREDIT
• Credit based on MAGI and family size
• To be eligible must have purchased insurance through MNsure marketplace
• Must have Form 1095-A from MNsure
• If taxpayer elected to receive the APTC, then the portion used during the year will be deducted from the calculated PTC amount
LINE 48: FOREIGN TAX CREDIT
• Enter the amount shown in box 6 of 1099-DIV or 1099-INT directly on line 48
• If required to use Form 1116 then it is out-of-scope
LINE 49: CHILD AND DEPENDENT CARE CREDIT
• Max credit: $3,000 for 1 qualifying person, $6,000 for 2+qualifying persons
• Cannot be married filing separately
• Must have earned income
• Expenses must be paid by the taxpayer to work or look for work
• Form 2441
QUALIFYING PERSON
• Child under age 13 and claimed as an exemption
• Person who is physically/mentally incapable of self-care and couldn’t be claimed as exemption because income was $3,950+
• Spouse who is physically/mentally incapable of self-care
QUALIFYING EXPENSES
• Paid by the taxpayer (spouse) to work or look for work
• Child in nursery school or pre-school for children below level of KG qualify for the credit
• Overnight camp does not qualify
• Day camp may qualify if the camp specializes in a particular activity such as computers or soccer
QUALIFYING PROVIDER• Payments cannot be made to the
taxpayer’s (spouse) dependent
• If payments are made to a taxpayer’s (spouse) child, he/she cannot be a dependent and must be age 19 or older by the end of the year
• If the provider refuses to give EIN/TIN, the taxpayer can still claim the credit, see Pub 17, “provider refusal”
LINE 50: EDUCATION CREDITS
• American opportunity credit, max credit $2,500 per student
• Lifetime learning credit, max credit $2,000 per return
• Cannot use both credits for the same student
• Form 8863
CANNOT CLAIM THE CREDIT
• Claimed as a dependent on another person’s tax return, such as the taxpayer’s parent
• Filing status is married filing separately
• Was a nonresident alien for any part of 2014 (nonresidents are out-of-scope for Tri-CAP)
EDUCATION DOCUMENTATION
• Can be shown on Form 1098-T or annual statement from the institution or receipts for books and equipment
• Reduce expenses by amounts received from scholarships and grants shown in box 5 of Form 1098-T
AMERICAN OPPORTUNITY CREDIT• 40% of the credit may be refundable
• Available for the first 4 years of post secondary education
• Pursuing a degree or recognized educational credential
• Enrolled at least half time
• No felony drug convictions
NOT ELIGIBLE FOR THE REFUNDABLE AMERICAN OPPORTUNITY CREDIT
1. Taxpayer is (a) under age 18; or (b) age 18 and their earned income was less than ½ of their support; or (c) FT student over age 18 and under 24 and earned income was less than ½ of their support; AND
2. At least one of his/her parents was alive at the end of the year; AND
3. Taxpayer is not filing a joint return
LIFETIME LEARNING CREDIT
• Nonrefundable
• Available for an unlimited number of years
• Do not to be pursuing a degree
• Can take one or more courses
• Felony drug convictions are permitted
EXPENSES• Qualifies: tuition, required enrollment fees and
course-related materials such as books, supplies and equipment
• American opportunity credit: books, supplies and equipment do not have to be purchased from the school
• Lifetime learning credit: books, supplies and equipment must be purchased from the school
• Does not qualify: computer tech fees, student activity or athletic fees, insurance, room and board, transportation
CALCULATING EXPENSES
Scenario 1
Tuition $12,500
Course-related materials $650
Scholarships and Grants ($5,000)
Eligible expenses for credit $8,150
LINE 51: RETIREMENT SAVINGS CREDIT
• Taxpayers qualify if they made contributions to an eligible plan
• Contributions to employer-sponsored plan are shown in box 12, Form W-2
• Contributions to a traditional IRA or Roth IRA
• Must be age 18 or older and cannot be a FT student
• Form 8880
LINE 52: CHILD TAX CREDIT
• Nonrefundable credit up to $1,000 per child
• Taxpayers not claiming the full amount may be eligible for the refundable Additional Child Tax Credit
• Must have a Qualifying Child, determined by info entered on TaxWise Main Information Sheet
• Form 8812
• Line 57: self-employment tax
• Line 59: additional tax on IRAs, other qualified retirement plans – early distributions subject to 10% penalty
• Line 60b: 1st time homebuyer credit repayment
• Line 61: health care, individual responsibility